Whether you’re 25 or 65, it’s important to know how to find the right financial planner. But what does “right” look like?
You want a financial advisor that’s a great fit for you and your financial goals. That means someone who understands what you aspire to and sits down to work with you to figure out how to get there.
Sounds simple — but not all advisors will do this. Some may not understand your desire to take a year off to travel the world, or your goal to sell off all your stuff and buy a tiny house in the middle of the Pacific Northwest.
Having a financial planner who not only can help you with the numbers, but can also emotionally and mentally support your unique journey and progress is key.
So how do you start searching for that perfect planner that’s right for you? By asking the right questions and truly understanding your own goals. These tips will help you find a professional who not only helps you create a financial plan, but truly gets you and what you want to achieve with your money.
Find a Fiduciary
The first thing you need to find out when vetting a financial planner is whether or not they’re a fiduciary. This means that they are legally and ethically held to the standard of working in your best interest at all times.
Surprisingly, this isn’t a requirement! Some financial professionals are only held to a standard of recommending what’s “suitable” for you. If you don’t work with a fiduciary, you’re not getting advice that’s in your best interest.
Ask How the Planner Gets Paid
One way to get an idea whether an advisor is a fiduciary or not is to understand how they get paid. While a planner who is working on commission may be getting the job done, their method may not be the best for you and your interests.
That’s because they’re financially incentivized to sell you products that boost their own bottom line. A commission-based planner could be a wonderful person — but that’s a big conflict of interest for anyone to face.
Here are the common ways advisors receive payment:
- Commission. A professional receives payment or compensation when their client buys a financial product or invests in a certain fund. Life insurance agents are often paid on commission, and the larger the policy they sell, the more money they make. Financial advisors can be paid on commission, too, and face big conflicts of interest — and only need to recommend what’s “suitable” for their clients, not what’s best for the client.
- Fee-based. These financial professionals can earn commissions, but they also charge fees to the clients they work with. These may look like good advisors to work with, but they still face conflicts of interest because they receive payment from someone other than you!
- Fee-only. Fee-only financial advisors only receive payment from the clients they work with. Legally, they cannot earn kickbacks or commissions from anyone else and they are highly regulated to ensure they’re working in a client’s best interest at all times.
You need to understand these terms, because going by someone’s professional title (like “wealth manager” or “advisor”) won’t tell you enough. These terms aren’t regulated and do not indicate whether or not someone is a fiduciary, or if they get kickbacks from things like big mutual fund companies when they convince you to buy a certain product.
Questions to Ask Before Hiring a Fee-Only Financial Planner
Once you’ve found a planner you’re interested in, it’s time to check to see if they’re the right fit for you. The way you’ll do this is by asking the appropriate questions.
First, check their certifications. Are they a CFP? Are they members of planning networks and other organizations
Organizations like XY Planning Network, the National Association of Personal Financial Advisors (NAPFA), and Garrett Planning Network allow you to search for planners based on the kind of planning or client they specialize in.
Do they only work with wealthy people who already have $500,000 in investments and savings? Or do they work solely with business owners? Do they specialize in serving families with small children or do they really get the needs of military families who frequently move?
Their clientele can tell you a lot about their experience and expertise. You will ultimately want to hire a planner who has experience working with clients just like you because they really understand your situation and can provide services that address your specific needs.
And again, always ask: are you a fiduciary? Many will claim they will act in a fiduciary manner, but ultimately aren’t fiduciaries. You can go a step further to clarify this by requesting the advisor to sign fiduciary oath (see an example here!)
This agreement ensures they put your interests first and will serve accordingly. Don’t forget to ask how they get paid, too, and avoid commission- and fee-based services.
How to Determine If a Planner Is Right For You
Once you have answers to all those basic questions, what’s next?
Let’s be honest: money can be an uncomfortable topic. Having a good relationship and rapport with anyone who is going to dive deeply into your financial situation and ask you to consider your emotions around finances is critical.
Actually liking your financial planner is important! You want someone you can be honest with and feel comfortable asking questions and having intimate conversations with.
Financial planners are there to help you live your best life and reach whatever goals you have, like starting a family or business, giving to charity, getting married, buying a house, and so on. The right financial planner will go through your goals with you and figure out how to you can best use your money to reach these goals.
Over time, these goals may change, which means how you utilize your money may change too — and that’s okay. Having a planner there with you every step of the way to help you avoid making any big mistakes can make a big, positive impact on your wealth over time.Think of your financial planner like your accountability partner for your values and goals. The right advisor will be there to help manage your behavior and your emotions when things get tough and to keep you on track. They help direct your dollars to whatever is important to you — not what’s important to them, or to what they think you should focus on.
Think of your financial planner like your accountability partner for your values and goals. The right advisor will be there to help manage your behavior and your emotions when things get tough and to keep you on track. They help direct your dollars to whatever is important to you — not what’s important to them, or to what they think you should focus on.
Need help with your search? You can start by learning more about how hiring a fee-only financial planner working as your fiducary can change your financial life.